Malik, C.J. - (1.) THERE was a joint family of a father and two sons, Sahu Nand Lal Saran, Shiva Shakti Saran and Raghubir Saran. This joint family was carrying on money-lending business. THERE was a partition on 10th March 1930, and the father and the two sons separated. After the separation, the father carried on the separate money-lending business and the two sons entered into a partnership, and the partnership also, under the name and style of Messrs. Shiva Shakti Saran Raghubir Saran of Moradabad carried on money-lending business. Sahu Nand Lal Saran was assessed to Income tax out of the income made by him from the money-lending business and from his other properties, and the partnership firm of Messrs. Shiva Shakti Saran Raghubir Saran of Moradabad was separately assessed to Income-tax as an unregistered partnership.
(2.) SAHU Nand Lal Saran had during the previous year 1937-38 made some income by his money-lending business and a notice was issued to him by the Income-tax Officer under Section 22 (2), Income tax Act. While the assessment proceedings were still pending, on 29th February 1938, SAHU Nand Lal Saran died. Under his will dated 15th May 1936, this money-lending business was inherited by his two sons, Shiva Shakti Saran and Raghubir Saran. Shiva Shakti Saran and Raghubir Saran, who were carrying on their money-lending business in partnership, continued to carry on the money-lending business which they had inherited from SAHU Nand Lal Saran, and it was found by the Commissioner of Income-tax that both these businesses were carried on together and treated as branches of the same business. The Income-tax Officer passed the assessment order on 22nd February 1939, and in that he added a sum of Rs. 5438/-, which was the profit made out of the business carried on by SAHU Nand Lal Saran in the previous year 1937-38 before his death, to the profits made by the partnership which was Rs. 16,902/-. An appeal was filed to the Appellate Assistant Commissioner and the point raised before him was that the income from the business left by Sahu Nand Lal Saran should be assessed in the hands of Shiva Shakti Saran and Raghubir Saran half and half and it should not be treated as the profits made by the firm, Messrs. Shiva Shakti Saran Raghubir Saran of Moradabad. This affected the rate at which income-tax was to be charged as the rate at which income-tax was payable on the total sum of Rs. 22,340/- consisting of Rs. 16,902/- and Rs. 5438/- was higher than the rate at which income-tax was payable on half of Rs. 5,438/- in the hands of each brother. The Assistant Commissioner was of the opinion that the two brothers might have claimed to be separately assessed if they bad divided the business that they had inherited or if the two businesses had been carried on in different partnerships. This decision was affirmed by the Appellate Commissioner by an order dated 6th July 1940. There was thereafter an application made to the Commissioner to refer a case to this Court, but the Commissioner rejected that application on the ground that no question of law arose for decision which could be referred under the provisions of Section 66, Income-tax Act. Thereafter an application was filed in this Court on 13th November 1940, under Section 66 (3), Income-tax Act, and on 6th December 1944, a Bench of this Court directed the Commissioner to state the case and refer the same to this Court in accordance with the provisions of unamended Section 66 (3), Income-tax Act. On receipt of that order the Commissioner of Income-tax has referred to us the following question: "Whether in the facts and circumstances of the case, the profit of Rs. 5438/- which had accrued to the late Sahu Nand Lal Saran can be assessed as the income of the unregistered firm of Shiva Shakti Saran Raghubir Saran under Section 26 (2) of the Act,''
(3.) ON the finding arrived at by the Commissioner that the business of money-lending carried on by Sahu Nand Lal Saran was now being carried on by the unregistered firm of Shiva Shakti Saran Ragubir Saran, the question arises whether the firm, Shiva Shakti Saran Raghubir Saran, can be deemed to be the successors of the business carried on by Sahu Nand Lal Saran. It has been pointed out by learned counsel and to our minds rightly that when Sahu Nand Lal Saran died then his two sons got the business under the will not as partners but as co-owners to whom the business was bequeathed, but on getting it they carried on the business in the same capacity in which they were carrying on the partnership business of the firm Shiva Shakti Saran Raghubir Saran. Strictly speaking, therefore, notionally there were two successions. On the death of Sahu Nand Lal Saran the business came, under the bequest, to his two sons Shiva Shakti Saran and Raghubir Saran, and having got it they decided to carry on the business, which was of the same type as the partnership business, in the same manner in which they were carrying on the partnership business.;